GM, GMAC

GM, GMAC...

General Motors: We downgrade GM to "B+"; more positive on GMAC

The following is a summary of our full-length report on this topic, dated
October 18, 2005.

* GM reports very weak 3Q05 results:

GM reported a loss of $1.1 billion (excluding special items) in 3Q05, compared with $315 million net income (3Q04), reflecting very weak auto unit results and $675 million in net income at GMAC. Market share in North America declined to 25.6% (28.5% 3Q04).

* Health care deal with UAW to reduce costs announced:
GM said that it had reached an agreement with the UAW, subject to ratification, to reduce its projected healthcare liability by $15 billion (from $77 billion) and lower annual cash healthcare costs by $1 billion. While GM expects a structural cost reduction run rate of $5 billion by end of 2006, we believe this will be very difficult to achieve.

* We are more positive on GMAC:
GM said it is exploring the possible sale of a controlling interest in GMAC to a strategic partner with the intention of obtaining separate investment grade ratings for GMAC. We believe it is likely that GM will be successful in selling a controlling stake in GMAC and in achieving an investment grade rating for GMAC.

* We downgrade GM to "B+" from "BB"; more positive on GMAC:
We downgrade GM to "B+" from "BB" and maintain a "Deteriorating" credit trend in light of deteriorating credit fundamentals. We believe that the relative value of GMAC bonds has improved. We believe investors should consider whether GM/GMAC bonds are appropriate investments.